Dirk Niepelt

Dirk Niepelt is Director of the Study Center Gerzensee and Professor at the University of Bern. A research fellow at the Centre for Economic Policy Research (CEPR, London), CESifo (Munich) research network member and member of the macroeconomic committee of the Verein für Socialpolitik, he served on the board of the Swiss Society of Economics and Statistics and was an invited professor at the University of Lausanne as well as a visiting professor at the Institute for International Economic Studies (IIES) at Stockholm University.

Articles by Dirk Niepelt

At an AEI event in Washington, James McAndrews discussed narrow banking and the Federal Reserve’s opposition to McAndrews’ “The Narrow Bank USA Inc.”
His slides emphasize the fact that a narrow bank can help achieve goals that Federal Reserve representatives themselves promoted in the past.

December 2018. PDF. In: Ernest Gnan and Donato Masciandaro, editors, Do We Need Central Bank Digital Currency? Economics, Technology and Institutions, SUERF, The European Money and Finance Forum, Vienna, 2018.
A short version of the CEPR working paper.

The ECB launches its Target Instant Payment Settlement (TIPS) system, which facilitates instant money transfers between banks and allows end users connected to those banks to make instant retail payments across the Euro zone.
Report in the FAZ. Last year’s report by Mehreen Khan in the FT.
From the ECB’s website:
TIPS was developed as an extension of TARGET2 and settles payments in central bank money. TIPS currently only settles payment transfers in euro. However, in case of demand other currencies could be supported as well. …
… a number of national solutions have been developed, or are under development, across the EU. A challenge for the Eurosystem is to ensure that these national solutions do not (re)introduce fragmentation … TIPS aims to minimise this risk by offering a service

Finanz und Wirtschaft, November 24, 2018. PDF. Ökonomenstimme, November 26, 2018. HTML.
European firms dealing with Iran face U.S. “secondary sanctions.”
European counter measures (including a blocking statute) prove toothless.
Even central banks in the European Union surrender to U.S. pressure, as does SWIFT.
Ignorance is bliss: For a sovereign, the best protection against foreign states pressuring to monitor domestic citizens and businesses may be to know as little as possible.

On German TV, stand-up comedian Dieter Nuhr exposes the contradictions of calls for justice and equality that characterize much of the German public debate. His hour-long performance could well serve as a lecture in economics and ethics.

At a conference in Singapore, IMF Managing Director Christine Lagarde has argued that
[w]hile the case for digital currency is not universal, we should investigate it further, seriously, carefully and creatively.
In her speech she emphasizes potential benefits related to financial inclusion; security and consumer protection; and privacy. (Privacy would be limited however.) She sees risks as well, including to innovation. But she de-emphasizes the notion of increased run risk which commentators often stress.
What about the risk of bank runs? It exists. But consider that people run when they believe that cash withdraws are honored on a first-come-first-serve basis—the early bird gets the worm. Digital currency, instead, because it can be distributed much more easily than cash, could

The Riksbank has published the second e-krona project report (website). In a special issue of the Riksbank’s Economic Review, several authors discuss related issues.
I will participate in a Riksbank panel in early December to discuss CBDC and the e-krona project.

Laurent Ruessmann and Jochen Beck, FieldFisher, 17 July 2018, International firms caught between US Iran sanctions and EU blocking statute.
Several authors, Gibson, Dunn & Crutcher LLP, 9 August 2018, The “New” Iran E.O. and the “New” EU Blocking Sanctions—Navigating the Divide for International Business.
The “primary sanctions” that limit U.S. companies and persons from engaging with Iran have on the whole never been lifted. The principal sanctions relief provided by the United States [until 2018] have been of “secondary sanctions” that focus on non-U.S. companies’ transactions with Iran. These measures are designed to force non-U.S. firms to choose to either engage with Iran or the United States. …
All of the sanctions and [the EU’s] counter-sanctions are in large part discretionary.

My July 2018 CEPR working paper “Reserves For All? Central Bank Digital Currency, Deposits, and their (Non)-Equivalence” has made it on several SSRN top ten lists. PDF. (Personal copy.)
Abstract: I offer a macroeconomic perspective on the “Reserves for All” (RFA) proposal to let the general public use electronic central bank money. After distinguishing RFA from cryptocurrencies and relating the proposal to discussions about narrow banking and the abolition of cash I propose an equivalence result according to which a marginal substitution of outside for inside money does not affect macroeconomic outcomes. I identify key conditions on bank and government (central bank) incentives for equivalence and argue that these conditions likely are violated, implying that RFA would change

SWIFT, the international financial messaging system, has responded to the U.S. sanctions threat (see this post)—it has agreed to comply. Michael Peel reports in the FT, that SWIFT
suspends certain Iranian banks’ access to its cross border-payment network.
According to Peel, SWIFT explains the step as follows:
“This step, while regrettable, has been taken in the interest of the stability and integrity of the wider global financial system.”
This does not only expose SWIFT to punitive actions by the European Union since
… new EU rules … forbid companies from complying with the US Iran sanctions.
It also seems to contradict the explanations that SWIFT provides on its homepage:
[w]hilst sanctions are imposed independently in different jurisdictions around the world, SWIFT cannot arbitrarily

Nils Bohr chose
Contraria Sunt Complementa
as motto for his coat of arms. According to his son and others, Bohr distinguished between the logical properties of trivialities on the one hand and profound truths on the other:
The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth. [Unsourced]
There are two sorts of truth: Profound truths recognized by the fact that the opposite is also a profound truth, in contrast to trivialities where opposites are obviously absurd. [Quoted by Hans Bohr]
It is the hallmark of any deep truth that its negation is also a deep truth. [Quoted by Max Delbrück]

In the NZZ, Daniel Gerny and Simon Hehli report about potential conflicts of interest at Bern’s university hospital, the Inselspital.
A cardiologist found evidence of negative health effects of in vitro fertilization, which the Inselspital offers. But unusually, the hospital’s PR department didn’t advertize the findings. The motivation to keep quiet, according to the PR department, was that the findings are of relevance also for other groups at the hospital, and that this would have to be taken into account:
Publiziert wurde die Berner Studie im renommierten Fachmagazin «Journal of the American College of Cardiology». Seit Tagen sind die Untersuchungsergebnisse in aller Munde. … Umso erstaunlicher, dass ausgerechnet Scherrers Arbeitgeber, das Inselspital, der Studie keine grosse

Farmers in Switzerland receive about CHF 2.7 billion in direct financial support annually. Total financial support by the federal and cantonal governments equals more than CHF 4 billion. But according to a report published by Zurich based think tank Avenir Suisse, this financial support constitutes just a minor part of the transfers from society at large to farmers, due to explicit and implicit subsidies, privileges, and—most importantly—negative externalities.
A list of privileges compiled by Avenir Suisse.
Avenir Suisse estimates the value added of Swiss agriculture to be hugely negative.
Die heutige Schweizer Landwirtschaft resultiert in einer negativen Wertschöpfung von minus 15,8 Mrd. Fr. pro Jahr. Damit kostet sie uns umgerechnet rund 1,8 Mio. Fr. pro Stunde.
In the NZZ, Nicole

MA course at the University of Bern.
Time: Wed 10-12. KSL course site. Course assistant: Lukas Voellmy.
The course introduces Master students to modern macroeconomic theory. Building on the analysis of the consumption-saving trade off and on concepts from general equilibrium theory, the course covers workhorse general equilibrium models of modern macroeconomics, including the representative agent framework, the overlapping generations model, and possibly the Lucas tree model. Lectures follow chapters 1–4 (possibly 5) in this text.

VoxEU, August 20, 2018. HTML.
To a first approximation, inside and outside money are substitutes—the introduction of CBDC does not change the equilibrium allocation.
Bank incentives and central bank incentives might be affected though.
CBDC could increase the incentive to extend credit but might undermine the political support for implicit financial assistance to banks.

CEPR Discussion Paper 13065, July 2018. PDF. (Personal copy.)
I offer a macroeconomic perspective on the “Reserves for All” (RFA) proposal to let the general public use electronic central bank money. After distinguishing RFA from cryptocurrencies and relating the proposal to discussions about narrow banking and the abolition of cash I propose an equivalence result according to which a marginal substitution of outside for inside money does not affect macroeconomic outcomes. I identify key conditions on bank and government (central bank) incentives for equivalence and argue that these conditions likely are violated, implying that RFA would change macroeconomic outcomes. I also relate my analysis to common arguments in the discussion about RFA and point to inconsistencies and open

In Environmental Health Perspectives, Milena Foerster, Arno Thielens, Wout Joseph, Marloes Eeftens, and Martin Röösli report findings that suggest potential adverse effects of adolescents’ mobile phone use on cognitive functions.
We found preliminary evidence suggesting that RF-EMF may affect brain functions such as figural memory in regions that are most exposed during mobile phone use. Our findings do not provide conclusive evidence of causal effects and should be interpreted with caution until confirmed in other populations. Associations with media use parameters with low RF-EMF exposures did not provide clear or consistent support of effects of media use unrelated to RF-EMF (with the possible exception of consistent positive associations between verbal memory and data traffic

On Moneyness, JP Koning discusses the ability or not of the U.S. treasury to enforce financial sanctions overseas. Focusing on the Iran sanctions that ran from 2010 to 2015 (with strong international support) and are scheduled to be reimposed soon (without such support) Koning compares the U.S. sanctions regime to an exclusivity agreement that a large retailer imposes on a manufacturer.
Foreign banks in places like Europe were free to continue providing transactions services to Iran, but if they did so they would not be able to maintain correspondent accounts at U.S. banks. To ensure these rules were enforced, U.S. banks were to be fined and U.S. bank executives incarcerated if found guilty of providing accounts to offenders. Fearful bank executives were very quick to comply by

In the New Yorker, Nathan Heller reviews David Graeber’s “Bullshit Jobs.”
In the course of Graeber’s diagnosis, he inaugurates five phyla of bullshit work. “Flunkies,” he says, are those paid to hang around and make their superiors feel important: doormen, useless assistants, receptionists with silent phones, and so on. “Goons” are gratuitous or arms-race muscle; Graeber points to Oxford University’s P.R. staff, whose task appears to be to convince the public that Oxford is a good school. “Duct tapers” are hired to patch or bridge major flaws that their bosses are too lazy or inept to fix systemically. (This is the woman at the airline desk whose duty is to assuage angry passengers when bags don’t arrive.) “Box tickers” go through various motions, often using paperwork or

In a CEPR discussion paper Christian Bayer, Chi Kim, Alexander Kriwoluzky analyze redenomination risk during the European debt crisis and how the European Central Bank’s interventions affected this risk. They conclude that the risk fell in the case of Italy but increased for France and Germany.
From the abstract:
… first estimate daily default-risk-free yield curves for French, German, and Italian bonds that can be redenominated and for bonds that cannot. Then, we extract the compensation for redenomination risk from the yield spreads between these two types of bonds. Redenomination risk primarily shows up at the short end of yield curves. At the height of the euro crisis, spreads between first-year yields were close to 7% for Italy and up to -2% for Germany. The ECB’s interventions